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Survey shows how power shifts in China’s retail industry

Bernhard Wessels

Managing Director, North Asia, Kantar Retail

Retail 28.06.2017 / 11:10

Power Retail 2 col

RT-Mart and P&G are still top FMCG retailer and manufacturer. Yonghui is fastest rising retailer. Three Chinese FMCG brands occupy top 10 manufacturers list.

Kantar Retail has been publishing annual China PoweRanking reports for six years. The PoweRanking survey originated from studies to research and benchmark how retailers and manufacturers view their relationships with each other.

The study reveals which retailers and manufacturers are rated highest in performance by their trading partners, thus setting benchmarks for others.

Retailers were asked to rank manufacturers in the following areas:

STRATEGIC METRICS
—— Clearest Company Strategy
—— Growth and Profitability
—— Important Consumer Brands
BUSINESS FUNDAMENTALS
—— Best Sales Force / Customer Teams
—— Innovative Marketing Approach
—— Consumer Insights / Category Leadership
—— Supply Chain Management
—— Shopper Marketing
—— In-Store Support
—— New Product Launch and Promotion
—— Digital Marketing

Manufacturers were asked to rank retailers on similar criteria:
STRATEGIC METRICS
—— Clearest Company Strategy
—— Power Retailers in Next 5 Years
—— Store Branding
—— Growth and Profitability
BUSINESS FUNDAMENTALS
—— Best Buying Teams
—— Innovative Merchandising
—— Supply Chain
—— Category Management Teams
—— In-Store Execution
—— Digital, Mobile and Social Networking

More than 360 manufacturer and retailer participants provided information. Respondents included all levels of retailer and manufacturer management. Below is a list of some of the leading companies they represent.

Brands At 2016 Powe Ranking

Last year, RT-Mart for the first time overtook Walmart, which has been dominating the retailer ranking for four years, to be the new leader. In this year’s survey, RT-Mart beat Walmart again, but with a razor-thin margin of 0.3 percentage point. RT-Mart won by its apparent advantage in comprehensive strategic strength, while Walmart is the leader in business fundamentals.

EN 2016 Powe Ranking Top Retailers

Compared with last year’s ranking, Yonghui moved up by only one notch to exchange place with former No.3 Vanguard. However, the proportion of manufacturers who mentioned it in top 3 retailers jumped to 34.3% from 26.1% - an 8.2 percentage point spike. This is closely related to Yonghui’s recent aggressive expansion and high off-line conversion rate.

Q1 Top 5 Retailers

Kantar Worldpanel data showed that out of the top five retailers in China, only Yonghui managed to grow its penetration and frequency among consumers in Q1, 2017. Even though its basket size was also shrinking, it was about the industry average level.

On the manufacturer side, three Chinese brands made it to the top 10, compared with only Yili in last year. Yili, which jumped from No. 16 to No.8 last year, continued to move up to No.5 in this year’s ranking; Uni-President jumped to No.6 from No.15 and Master Kong moved up by two notches to sit at No.9.

EN 2016 Powe Ranking Top Manufacturers

Retailers commented that Uni-President performed strongly in strategy (from No.19 to No.6) because it has a “clear picture of market distribution” and “frequent new product launches to maintain category leading position”; as well as in business fundamentals (from No.12 to No.5) for “frequently launches creative marketing activities along with new products”.

The same as previous years, this survey also summarized what matters most to manufacturers and retailers.

What Matters Most to Manufacturers?

2016 What Matters Most To Manufacturers 

In-store Execution is still the most important factor for manufacturers. With the China retail market maturing we are seeing less differentiated strategies among retailers. Sales performance is directly influenced by how accurately and quickly retailer outlets can process and interpret information. From the manufacturers’ point of view, retailers’ strong in-store execution is a key indicator of the successful implementation of their strategies and goals.

Apart from In-store Execution, the other two rankings in the top three are Clear Company Strategy and Growth & Profitability — these are both strategy-related indicators. Manufacturers are not only paying attention to retailers with strong influence, but also emphasizing retailers’ future potential. The ranking of To Be Power Retailers in Next 5 Years moves up one place. This shows that when selecting partners, manufacturers do not only consider short-term profit, but also retailers’ long-term development.

In basic business cooperation, the level of expertise in retailers’ buying teams and category management has a direct influence on manufacturers’ revenue. In recent years, with the overall decline in the FMCG market, there is a more urgent need to expand the category through joint initiatives by both manufacturers and retailers.

What Matters Most to Retailers?

2016 What Matters Most To Retailers 

Clear Company Strategy ranked No.1 in this year's report, becoming the most important business factor for retailers. This was closely related to overall macro economy of China, the needs of shoppers and the structure of the retail industry. Although the overall growth rate of China’s economy is moderating, consumer demand for better quality continues to rise.

Meanwhile, we are witnessing a retail market with more intense competition as many eCommerce players have entered the space. In this dynamic landscape, manufacturers with clear and definite development strategies have become vital to retailers. Clear strategies can guide manufacturers on product innovation and marketing. Moreover, it can allow them to plan the development of quality products, meeting the needs of consumers and differentiating themselves from the competition.

Apart from strategic advice, retailers are approaching manufacturers for more substantial cooperation and support. Supply Chain Management ranked in the top three again in this year’s research. This shows the expectation and requirement of retailers to build a more efficient supply chain in response to greater operating pressures.

The importance of In-store Support saw a marked rise in this year’s research. When facing heavy customer traffic and sales pressures, retailers expect more store support from manufacturers to improve efficiency at the point of sale. Indeed, this general need for efficiency is amplified by the competitive threat of online players.

The internet and specifically mobile phone have changed the way people shop and how brands reach consumers. More fragmented consumer attention habits and segmented social groups have made marketing more challenging. Retailers are expecting manufacturers to apply more innovative marketing approaches to stimulate consumption.

To request a summarized version of this year’s China PoweRanking report, please contact Eva Wu: eva.wu@kantarretail.com

Source: Kantar Retail

Editor's notes

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